Tuesday, November 4, 2008

Stimulate Economy Now - Don't Wait Until January 09

Further to my last blog, in regards to the stagnating and downward spiral of the North American Economy - and the upcoming Christmas retail season.

In past recessions dating back to the dirty thirties, goverments did things like "make-work" projects locally, and large infrastructure projects nationally; injecting much needed cash into the economy and getting it working again.

In recent years, including the most recent "mortgage fiasco" governments are proposing of buying up the bad assets, taking voting positions and control in the USA alone to the tune of $170 Billion dollars - and that still might not be the final figure.

In the 1980's and 1990's, governments bought their way out of depessions and possible recessions by injecting large sums of cash to get the economy humming again.

Consumer confidence and economic cash flow, in the short term - may also be achieved by the goverment injecting cash directly to the voters. If the governments are going to give this money to Wall Street, to correct their mistakes and the people on Main Street are the ones who are paying for it - make it worth their while. Send pre-load credit cards with $1,000 BEFORE CHRISTMAS, to every registered voter in the United States of America ( and other countries may wish to do this on a pro-rata basis of what they give to their banks, too). US government is giving $700 Billion to possibly 2 or 3 Trillion dollars to the banks to stabilize the US Economy; then send these $1,000 pre-loaded credit cards to the estimated 176 million registered voters of Main Street USA (approximately costing $176 Billion Dollars US), and I would hazard a good guess that Main Street will spend that money into getting the Economy back on line.

350 Million Peoples in A World of Six Billion

The President-Elect Obama stated that his first priority is the economy. In analysing any problem, digging out the factual data is the path to a successful resolution of a problem. A lot of the North American and World Media have been making statements that the Mortgage fiasco is to blame for the current slide into a possible recession in North America and the rest of the world.
To Quote a Story "By LAUREN KRUGEL, THE CANADIAN PRESS"
Monday, November 3, 2008

CALGARY — A prominent Canadian economist says oil prices deserve credit for the global economic slowdown, not the crash of the U.S. housing market.
In a report Monday, CIBC World Markets economist Jeff Rubin questioned whether plummeting home values in U.S. cities like Cleveland — deemed by many to be the epicentre of the housing crisis — could possibly be behind the widespread global turmoil.
“Is Cleveland, and all the other depressed property markets in the U.S., really big enough to deep-six a $60-trillion world economy?” Rubin asked, noting that Japanese and European economies were plunged into a recession well before the United States was.
He said perhaps the implosion of U.S. property values is “just a big head fake” and that something entirely different is at play.
He notes that four of the past five global recessions were preceded by an oil shock, and this time it should be no different.
“Yet the recent spike in oil prices doesn’t seem to get any credit for what’s happening to the world economy now,” Rubin wrote. “That’s odd, because it should.”
The more than 500 per cent increase in the price of oil gets “virtually ignored as a culprit behind today’s’ economy, eclipsed by the ongoing crisis in financial markets,” he said.
He added that global demand has taken a hit as income from consumers in developed, oil-needy countries flows into the coffers of oil producing nations such as Saudi Arabia, which tends to save much more of its money.
“In effect, the income transfer from American motorists to Saudi Aramco means that more and more of the world’s income gets saved and less spent. That demand leakage shows up in a weaker world economy,” he said.
And the high fuel prices, which have since come off substantially, have also been slicing into consumer purchasing power.
The price of crude spiked at a record US$147 in July, but has since been cut by more than half to below US$64 a barrel.
The steep decline offers some reason for optimism, said Rubin.

“Diagnosing the disease is always a good first step to finding a cure,” Rubin said.
“If the global recession is primarily about the recent oil price shock, then the subsequent halving of prices ... and not a pickup in Cleveland property values, is the real road to recovery.”
Doug Porter, deputy chief economist for BMO Capital Markets, said the downturn we are currently seeing is not part of a “garden-variety cycle” and that housing is clearly at the centre of it.
“There’s no question that the spike in oil prices to over $140 definitely aggravated what was already an extremely fragile economic situation, and arguably pushed the U.S. economy over the edge,” he said in an interview.
The falling commodity prices will have direct implications — both positive and negative — for the Canadian economy, Porter added.
When oil spiked above US$125 per barrel earlier this year, the oil and gas sector in western Canada flourished, but other parts of the country suffered.
The high oil prices took a massive toll on the automotive sector, as fewer and fewer consumers were able to afford fuel for their cars. Meanwhile, many trucking, manufacturing and other fuel-consuming businesses saw their overhead costs skyrocket.
With oil prices sharply lower now, the situation is reversed.
Oilsands producers in Alberta are scaling back their plans and cutting spending. But the hard-hit manufacturing sector in central Canada has more breathing room and consumers are paying less to fill up their gas tanks.
“Unfortunately, you can get too much of a good thing and now that we’ve had this deep drop in energy prices, I think the negatives will probably start to outweigh the positives,” said Porter.
“The best thing for Canada is relatively high energy prices, but stable energy prices.”
So in retrospect, based upon data showing during the last recessions, slow-downs, down-turns and market disturbances - the increasing cost of oil could possibly be more of the culprit; with other contributing factors like the mortgage fisaco in the USA and the resulting credit freeze across the world.
Saudia Arabia announced recently that it plans on cutting back on oil production, which we know, will in turn, raise the price of oil. So we are possibly in or heading to a quasi-down turn/soft recession. This news in light of research that states that the price of oil increases contributes and sets the stage for downturns in world economies, will most definitely push us further into a spiral of recession.
Efforts to stabilize and reinvigorate the US and World Economy, should begin with horizontal actions of discussions with Saudia Arabia and China - as they are "save nations" and have the available capital to assist in stabilizing American and World Wide Banks; to borrow $ 3 trillion dollars and goverments taking stakes in these banks (and at the same time prosecuting the violators that caused the banking crisis in the first place) and purchase off the assets that have been devaluated (values of property being lower than the mortgages on these properties).
Governments then will encourage lending again between banks, consumers and businesses; which will in turn invigorate business owners to keep their companies running and providing current jobs and expanding operations for future employment.
On an immediate basis, because of the upcoming Christmas Retail Season world wide; operating lines of credit for businesses to pay their payrolls, advertise their stock and prevent the "domino-effect" of the downward spiral towards recession because of the pull-back of credit that businesses need so desperately to maintain their companies.
China will feel this cancellation of Christmas Stock the most, as they are the largest exporter of manufactured goods in the world. By China being an intragral contributor in the loaning of the $3 trillion, they would be in effect, saving parts of their own current economic down-turn.
Banks worldwide have to get back into the business of being banks - taking deposits and lending money, making the economies move and do business; this in turns keeps jobs.
These actions are short and long term in nature, and banking in the long term has to become more goverment regulated in relation to the type of instruments of investments for sale - should receive goverment approval and understanding; to prevent the disaster we just went through with the mortgage fiasco's.
In recent articles across North America, many speak of "Energy Independence" and this may be achieved in a couple of ways. Switching to Green technologies in vehicle gas consumption, but the biggest consumer of energy in north america is our buildings - approximately 68% of enery consumption is used in the maintaining and heating/powering our building infrastructures. Solar, Wind and Water technologies are available now and can be expanded on to provide new "green jobs," reduce greenhouse gases world wide and move closer to energy independence.
There is a new emerging technology that encompasses Solar, Wind and Water that features power generation from within each and every home, with the excess power (using Net Metering Tarriffing) being sold to the electrical grids. Also, this decentralizes electrical grids and become less feasible for terrorists to destroy important energy infrastructure. A small model (for consumers' homes), is already designed and moving to the prototype stage; with plans for the future for co-generation units for larger buildings and complexes.
The second challenge is to design and install after market green technology on vehicles that will increase less dependency on oil, such as electrical/gas hybrids - which are being slowly developed now, but not at a fast enough pace.
All of this can increase the possibilities of "green jobs" not just in the thousands, but in the millions. Retro-fitting of homes to become electrial generating plants will literally cause a "boom" in the north american economy.